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Pound Sterling to Australian Dollar (GBP/AUD) Exchange Rate Forecast to Advance after British Public Sector Borrowing Declines

Australian Dollar Currency Forecast

The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate strengthened by around 0.35% on Friday morning.

With recent British data printing positively, and with pressures preventing inflationary pickup easing, the Pound Sterling advanced versus its major peers. Many futures traders are now speculating that the Bank of England (BoE) will begin a monetary policy tightening cycle before the close of the year.

The Australian Dollar, meanwhile, softened versus its major peers as geopolitics in Europe weighed on market sentiment. In addition, a stronger US Dollar is also reducing demand for high-yielding assets.

The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate is currently trending in the region of 2.0439.

Pound Sterling (GBP) Exchange Rate Forecast to Strengthen against the ‘Aussie’ (AUD) on BoE Bets

Over the past few days the Pound rallied thanks to positive labour market data and retail sales growth. Of particular note was impressive average earnings growth. Friday has seen the Pound continue to strengthen versus most of its rivals after government borrowing declined. ‘In May 2015, public sector net borrowing excluding public sector banks (PSNB ex) was £10.1 billion; a decrease of £2.2 billion, or 18.0% compared with May 2014,’ stated the ONS.

‘The economic upturn, and the buoyant labour market in particular, is feeding through to big improvements in government borrowing figures,’ said Markit’s chief economist Chris Williamson.  ‘Better-than-anticipated tax revenues could perhaps even pave the way for a less aggressive stance on spending cuts, sources of which are becoming increasing hard to identify.’

The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate dropped to a low of 2.0353 today.

Australian Dollar (AUD) Exchange Rate Forecast to Decline against the UK Asset on US Dollar Appreciation

In general, the Australian Dollar is sensitive to US Dollar movement. If the US Dollar ticks higher, demand for high-yield assets drops, and so the ‘Aussie’ declines. Thursday saw the Australian Dollar rally after the dovish Federal Open Market Committee (FOMC) caused futures traders to pare bets as to the timing of a benchmark rate increase. Friday has seen the ‘Aussie’ decline after the US Dollar strengthened in response to safe-haven demand.

Also weighing on demand for the Oceanic currency is falling gold prices. After the FOMC caused delayed Fed bets, traders invested heavily in gold thanks to its safe-haven properties. Friday has seen the gold price drop significantly, however, amid a spate of profit taking after the recent rally opened up some attractive selling opportunities.

Pound Sterling to Australian Dollar (GBP/AUD) Exchange Rate Forecast to Hold Gains on Damp Market Sentiment

Given the lack of further data publications to provoke changes, and with market sentiment showing no sign of recovery amid geopolitical tensions in Europe, the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate is likely to hold gains for the remainder of Friday’s European session. With that being said, should US data print negatively, the resultant US Dollar downtrend would see heightened demand for the ‘Aussie’.

The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate reached a high of 2.0464.